Delay coal-fired plant closure or risk blackouts, says Grattan Institute

Grattan Institute energy expert Tony Wood says planned closures of coal-fired power stations should be delayed to avoid blackouts and shortfalls in the national energy market.

Grattan Institute energy expert Tony Wood.

Grattan Institute energy expert Tony Wood says companies should “absolutely” consider delaying the planned closure of coal-fired power plants to help avoid blackouts and shortfalls in the national energy market.

The suggestions come as analysis from energy market researcher Cornwall Insight Australia found short-term capacity in the market was “significantly lower” than ­currently forecast, with delays in new energy generation projects not being properly reflected in modelling.

In February, the Australian Energy Market Operator warned of an urgent need for an acceleration in the rollout of back-up capacity – including batteries, lifelong storage and more generation – to avoid the risk of blackouts later this decade.

The update was provided after Snowy Hydro said its two key projects – the 750-megawatt gas-fired plant in NSW’s Hunter Valley and the $5.9bn Snowy Hydro pumped-hydro expansion – were at least a year behind schedule.

Mr Wood said the planned closure of coal-fired power stations could be reconsidered to ease the transition phase for households and consumers until better transmission capacity and storage technology came online.

“We can’t just let things go on the way they are because if they do, we will have real reliability problems and (lack of) reliability means blackout,” he said.

“The reality is that the number of outages of coal-fired power stations has been steadily increasing, and the incentive for companies to spend huge amounts of money to maintain those plants has been decreasing. We’re now in a situation where it can be solvable but it’s pretty ugly.”

Governments had focused too much on energy emissions reductions and had not prepared for shortfalls in the market, he said. “We know if we don’t do something in the next couple of years, Victoria will literally run out of gas … something’s got to be done.”

The report from Cornwall Insight Australia published on Monday found capacity in the national energy market was being “over-­estimated in the short term and underestimated in the long term”, with delays in energy project delivery cited as the main reason for inaccurate projections.

The consultancy firm said new connections in the NEM would likely take a year longer than expected to progress from “committed” to fully up and running.

Cornwall Insight Australia energy market specialist Ben Tudman urged the AEMO to explore all avenues to reduce uncertainty and facilitate investment into the energy sector.

“It is important to recognise the importance of increasing certainty for investors, to avoid slowing down the growth of the NEM capacity,” he said.

“The AEMO must be committed to exploring all possible avenues to reduce uncertainty and facilitate investments in the ­energy sector.”

On Monday, NSW Opposition Leader Chris Minns said a Labor government would consider buying back the nation’s largest power station, Eraring, to ensure supply until the end of the decade.